Market Watch

Alan Brugler is the President of Brugler Marketing & Management, and the primary analyst and advisor.

Welcoming In The New Year

Jan 08, 2010

Market Watch and March Corn Tech Talk with Alan Brugler

January 8, 2010

Welcoming In The New Year

Feed grain bulls welcomed in the New Year with some buying power. Corn open interest rose steadily throughout the week, and prices were up 2.05% for the week. Good margins for ethanol plants, improved profitability prospects for livestock, and export sales commitments that are 19% above last year all suggested steady to higher corn prices. Fund buying was also a definite factor. Wheat, which had been down the prior week, rebounded with gains of 4.4 to 5.5% at the three exchanges. Chart action was positive even though the known fundamentals continue to be poor (i.e. the loosest world stocks/use ratio since the turn of the century).

The soybean market has been on pins and needles for a while, knowing that there is a large South American crop coming, but uncertain as to when foreign customers will be comfortable enough with supplies to stop buying US origin and wait for the Brazilian or Argentine vessels to show up. That question still isn’t resolved, but demand questions popped up this week from the main world buyer. China raised interest rates in an attempt to slow a developing bubble. A new requirement to obtain import licenses for soybeans, and a warning to corporations to end speculative trading in equities and futures also weighed on the bean market because it seemed like maybe the Chinese thought they had purchased enough. Product values were also under pressure, with both BO and SM lower.

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:

Market Watch

Weekly

Weekly

12/18/09

12/24/09

12/31/09

01/08/10

Change

% Change

March Corn

$3.98

$4.09

$4.15

$4.23

0.09

2.05%

March CBOT Wheat

$5.28

$5.25

$5.42

$5.69

0.27

4.99%

March KCBT Wheat

$5.24

$5.22

$5.36

$5.60

0.24

4.43%

March MGEX Wheat

$5.35

$5.32

$5.45

$5.75

0.30

5.50%

January Soybeans

$10.12

$10.00

$10.40

$10.13

-0.27

-2.57%

January Soy Meal

$305.40

$301.40

$313.90

$306.80

-7.10

-2.26%

January Soy Oil

$38.33

$38.46

$40.35

$39.53

-0.82

-2.03%

February Live Cattle

$84.85

$84.75

$86.17

$85.82

-0.35

-0.41%

January Feeder Cattle

$94.72

$94.62

$95.87

$96.35

0.48

0.50%

February Lean Hogs

$65.12

$63.80

$65.60

$67.25

1.65

2.52%

March Cotton

$75.28

$73.43

$75.60

$72.44

-3.16

-4.18%

March Oats

$2.60

$2.60

$2.77

$2.75

-0.02

-0.72%

March Rice

$15.23

$14.97

$14.89

$14.96

0.06

0.44%

Cotton futures had a bad week, losing 4.18%. They may be a victim of the asset allocation adjustments being made by the index funds. Cotton prices rallied 54% in 2009, potentially requiring fewer contracts to maintain a fixed proportion of the portfolio. Routine profit taking also kicked in ahead of Tuesday’s USDA production and ending stocks estimates.Weekly export sales are showing more business from China, and the average trade guess for Tuesday shows a further decline in US ending stocks is anticipated.

Cattle futures lost 35 cents for the week. Marketing disruptions and poor rates of gain resulted in less beef tonnage and a jump in the wholesale beef market. Prices were up another $1.40 on Friday for the choice boxes, taking them to $142.14. That was a gain of $3.39 for the week. Select beef quotes were also higher. Cash trade was up $1-2 from the previous week. Estimated carcass weights were UNCH vs. year ago, but down 3# from the previous week.

Hogs rose 2.5% on continued strong ham demand that boosted the pork carcass cutout. Cash hogs were also difficult to originate in the western half of the Corn Belt, due to icy road conditions and a number of roads that were just plain closed by snowdrifts. Packers paid up to get the hogs to move where they could, and the tighter pork supplies forced wholesale prices higher. Estimated hog weights for the week were 3# below the same week in 2009.

Market Watch:Most of the excitement for the week will be on Tuesday. That is when USDA will release the Crop Production, Grain Stocks, Rice Stocks, Winter Wheat Seeding, WASDE supply/Demand and Cotton Ginning reports. There will be plenty of opportunity for surprises, either additive or canceling each other out. The routine reports will include Export Inspections on Monday and Weekly Export Sales on Thursday. In the background will be the monthly index fund rolling out of the February futures contracts in livestock, and re-allocating money to underperforming commodities from those with large gains in 2009.

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